Very brief points borrowed from Shiller's "Irrational Exuberance"

• Most media channels find and define news stories that are interesting with great word-of-mouth potential. Whenever possible, they re-define an ongoing story so that it encourages their audience to remain steady customers.


• They cultivate debates among experts on issues so that it seems there are experts on all sides of the issue. The debates are cultivated on issues about which there audience themselves are confused.


• Reporting on market outlook: superficial opinions are preferred to in-depth analysis by media to make issues of good word-of-mouth potential.


• Record Overload: The media stresses on data which can be interpreted of setting new records. Many reporters while covering for ‘one day price changes’ may report in points rather than percentages so as to set a new record. This only adds to the confusion people have about the economy.


• Statistical research has proved that big price changes have no useful association with news headlines.


• News stories may be tagged to price changes even when their actual reporting did not have considerable effect on stock prices.


• Absence of significance news has been reported prior to large price changes- news rather acts as a initiator of chain of events that fundamentally change the public’s thinking about the markets.


• News functions as the precipitator of (public’s) attention cascade. The new media can strongly foster feedback from past price changes to further price changes. It can also foster another sequence of events, referred by Shiller as attention cascade.

Speculative bubbles are a byproduct of the feedback loop that is the basis of propagation of markets.

Feedback loops work in all crowd processes. Politics, religion, marketing, stampedes are all phenomenon that progress well on feedback loops. Another way of understanding feedback loops has been espoused fabulously well in the Alchemy of Finance by George Soros. When the spread of bets in markets becomes so large that the price movements itself start bringing by the incurrence or non-occurence of events is what is at the heart of the Theory of Reflexivity.

In yet other simpler words, the cricket betting scandals are a perfect case of the demonstration of Reflexivity. At some point in the history of cricket betting, no longer were bets small enough to be based only on the fundamental judgement of team configurations, pitch quality, weather and the existing score. The size of bets spread out across different bookies or speculators became so huge that there was an economic incentive in propagating the fixings.

Markets ain't too dissimilar than these fixings, often. Common factor is the feedback loop.

So rather than hold out media, as if it were responsible for speculative bubbles, I would chip in my two cents that the study of memetics (how memes of group think develop) highlights the role of information. Media is a carrier of information. Garbage in Garbage Out is a cliched way of expression but works well across any memetic structures. Rumours, opinions, heresay, market view are all feeders into the media propagated memetic engines. Even in the age when media was not as organised, the South Sea Bubble did happen.

Media is a human affair. Markets are a human affair. With media the human affair of markets reaches its extreme behaviours sooner and faster. With media all other human affairs reach their logical conclusions faster. Media is not the originator of human nature but a mere accelerator, a mere catalyst in propagating the primordial human instincts.